7 MRP

Beni Asllani
Copyright 2006 John Wiley & Sons, University

Inc. of Tennessee at Chattanooga
Lecture Outline
 Material Requirements Planning (MRP)
 Capacity Requirements Planning (CRP)
 Enterprise Resource Planning (ERP)
BA 320
Resource Planning
or Manufacturing
BA 320
Material Requirements Planning
 Computerized inventory control and
production planning system
 When to use MRP?
 Dependent demand items
 Discrete demand items
 Complex products
 Job shop production
 Assemble-to-order environments
BA 320
Demand Characteristics
Independent demand Dependent demand
100 x 1 =
100 tabletops
100 tables 100 x 4 = 400 table legs
Continuous demand
400 – Discrete demand
400 –
300 –
No. of tables
300 –
No. of tables
200 –
200 –
100 –
100 –
1 2 3 4 5
Week M T W Th F M T W Th F
BA 320
Material Master
Requirements
production
schedule
Planning
Product Material Item
structure requirements master
file planning file
Planned
order
releases
Work Purchase Rescheduling

orders orders notices
BA 320
MRP Inputs and Outputs
 Inputs
 Master production schedule
 Product structure file
 Item master file
 Outputs
 Planned order releases
○ Work orders
○ Purchase orders
○ Rescheduling notices
BA 320
Master Production Schedule
 Drives MRP process with a schedule of
finished products
 Quantities represent production not
demand
 Quantities may consist of a combination of
customer orders and demand forecasts
 Quantities represent what needs to be
produced, not what can be produced
 Quantities represent end items that may or
may not be finished products
BA 320
Master Production Schedule (cont.)
PERIOD
MPS ITEM 1 2 3 4 5
Clipboard 85 95 120 100 100
Lapdesk 0 50 0 50 0
Lapboard 75 120 47 20 17
Pencil Case 125 125 125 125 125
BA 320
Product Structure
Clipboard
Top clip (1) Bottom clip (1)
Pivot (1) Spring (1)
Rivets (2)
Finished clipboard Pressboard (1)
BA 320
Product Structure Tree
Clipboard Level 0
Pressboard Clip Ass’y Rivets

(1) (1) (2) Level 1
Top Clip Bottom Clip Pivot Spring

(1) (1) (1) (1) Level 2
BA 320
Intended BOM List
LEVEL ITEM UNIT OF MEASURE QUANTITY

0---- Clipboard ea 1
-1--- Clip Assembly ea 1
--2-- Top Clip ea 1
--2-- Bottom Clip ea 1
--2-- Pivot ea 1
--2-- Spring ea 1
-1--- Rivet ea 2
-1--- Press Board ea 1
BA 320
Specialized BOMs
 Phantom bills
 Transient subassemblies
 Never stocked
 Immediately consumed in next stage
 K-bills
 Group small, loose parts under pseudo-item
number
 Reduces paperwork
BA 320
Specialized BOMs (cont.)
 Modular bills
 Product assembled from major subassemblies
and customer options
 Modular bill kept for each major subassembly
 Simplifies forecasting and planning
 X10 automobile example
○ 3 x 8 x 3 x 8 x 4 = 2,304 configurations
○ 3 + 8 + 3 + 8 + 4 = 26 modular bills
 Time-phased bills
 an assembly chart shown against a time scale
BA 320
Modular BOMs
X10
Automobile
Engines Exterior color Interior Interior color Body

(1 of 3) (1 of 8) (1 of 3) (1 of 8) (1 of 4)
4-Cylinder (.40) Bright red (.10) Leather (.20) Grey (.10) Sports coupe (.20)
6-Cylinder (.50) White linen (.10) Tweed (.40) Light blue (.10) Two-door (.20)
8-Cylinder (.10) Sulphur yellow (.10) Plush (.40) Rose (.10) Four-door (.30)
Neon orange (.10) Off-white (.20) Station wagon (.30)
Metallic blue (.10) Cool green (.10)
Emerald green (.10) Black (.20)
Jet black (.20) Brown (.10)
Champagne (.20) B/W checked (.10)
BA 320
Time-phased Bills
Forward scheduling: start at today‘s date and schedule forward to

determine the earliest date the job can be finished. If each item
takes one period to complete, the clipboards can be finished in
three periods
Backward scheduling: start at the due date and schedule
backwards to determine when to begin work. If an order for
clipboards is due by period three, we should start production now
BA 320
Item Master File
DESCRIPTION INVENTORY POLICY
Item Pressboard Lead time 1

Item no. 734 Annual demand 5000
Item type Purch Holding cost 1
Product/sales class Comp Ordering/setup cost 50
Value class B Safety stock 0
Buyer/planner RSR Reorder point 39
Vendor/drawing 07142 EOQ 316
Phantom code N Minimum order qty 100
Unit price/cost 1.25 Maximum order qty 500
Pegging Y Multiple order qty
LLC 1 Policy code 3
BA 320
Item Master File (cont.)
PHYSICAL INVENTORY USAGE/SALES
On hand 100 YTD usage/sales 1100
Location W142 MTD usage/sales 75
On order 100 YTD receipts 1200
Allocated 75 MTD receipts 0
Cycle 3 Last receipt 8/25
Last count 9/5 Last issue 10/5
Difference -2
CODES
Cost acct. 00754
Routing 00326
Engr 07142
BA 320
MRP Processes
 Exploding the bill of material
 Netting out inventory
 Process of subtracting on hand quantities and
scheduled receipts from gross requirements to
get net requirements
 Lot sizing
 Determines the quantities in which item are
usually made of purchased
 Time-phasing requirements
 Subtracts lead time from due date to detemine
when to order the item
BA 320
MRP Matrix
BA 320
MRP: Example
Master Production Schedule
1 2 3 4 5
Clipboard 85 95 120 100 100

Lapdesk 0 60 0 60 0
Item Master File

CLIPBOARD LAPDESK PRESSBOARD
On hand 25 20 150
On order 175 (Period 1) 0 0
(sch receipt)
LLC 0 0 1
Lot size L4L Mult 50 Min 100
Lead time 1 1 1
BA 320
MRP: Example (cont.)
Product Structure Record
Clipboard Level 0
Pressboard Clip Ass’y Rivets

(1) (1) (2) Level 1
Lapdesk Level 0
Pressboard Trim Beanbag Glue

(2) (3’) (1) (4 oz) Level 1
BA 320
ITEM: CLIPBOARD LLC: 0 PERIOD
LOT SIZE: L4L LT: 1 1 2 3 4 5
Gross Requirements 85 95 120 100 100

Scheduled Receipts 175
Projected on Hand 25
Net Requirements
Planned Order Receipts
Planned Order Releases
BA 320
LOT SIZE: L4L LT: 1 1 2 3 4 5

Projected on Hand 25 115
Net Requirements 0
(25 + 175) = 200 units available

(200 - 85) = 115 on hand at the end of Period 1
BA 320
LOT SIZE: L4L LT: 1 1 2 3 4 5

Projected on Hand 25 115 20
Net Requirements 0 0
115 units available

(115 - 85) = 20 on hand at the end of Period 2
BA 320
LOT SIZE: L4L LT: 1 1 2 3 4 5

Projected on Hand 25 115 20 0
Net Requirements 0 0 100
Planned Order Receipts 100
Planned Order Releases 100
20 units available
(20 - 120) = -100 — 100 additional Clipboards are required
Order must be placed in Period 2 to be received in Period 3
BA 320
LOT SIZE: L4L LT: 1 1 2 3 4 5

Projected on Hand 25 115 20 0 0 0
Net Requirements 0 0 100 100 100
Planned Order Receipts 100 100 100
Planned Order Releases 100 100 100
Following the same logic Gross Requirements in Periods 4

and 5 develop Net Requirements, Planned Order Receipts, and
BA 320
ITEM: LAPDESK LLC: 0 PERIOD
LOT SIZE: MULT 50 LT: 1 1 2 3 4 5
Scheduled Receipts
Net Requirements
BA 320
LOT SIZE: MULT 50 LT: 1 1 2 3 4 5
Scheduled Receipts
Planned Order Receipts 50 50
Planned Order Releases 50 50
Following the same logic, the Lapdesk MRP matrix is

completed as shown
BA 320
LOT SIZE: L4L LT: 1 1 2 3 4 5
LOT SIZE: MULT 50 LT: 1 1 2 3 4 5
ITEM: PRESSBOARD LLC: 0 PERIOD
LOT SIZE: MIN 100 LT: 1 1 2 3 4 5
Gross Requirements
Scheduled Receipts
Net Requirements
BA 320
LOT SIZE: L4L LT: 1 1 2 3 4 5
ITEM: LAPDESK LLC: 0 x1 PERIOD x1 x1
LOT SIZE: MULT 50 LT: 1 1 2 3 4 5
ITEM: PRESSBOARD LLC: 0 x2 x2 PERIOD
LOT SIZE: MIN 100 LT: 1 1 2 3 4 5
Scheduled Receipts
Net Requirements
BA 320
LOT SIZE: L4L LT: 1 1 2 3 4 5
LOT SIZE: MULT 50 LT: 1 1 2 3 4 5
ITEM: PRESSBOARD LLC: 0 PERIOD
LOT SIZE: MIN 100 LT: 1 1 2 3 4 5
Scheduled Receipts
Planned Order Receipts 100 150 100
BA 320
Planned Order Report

PERIOD
ITEM 1 2 3 4 5
Clipboard
Lapdesk
Pressboard
BA 320
Lot Sizing in MRP Systems
 Lot-for-lot ordering policy
 Fixed-size lot ordering policy
 Minimum order quantities
 Maximum order quantities
 Multiple order quantities
 Economic order quantity
 Periodic order quantity
BA 320
Advanced Lot Sizing Rules: L4L
Total cost of L4L = (4 X $60) + (0 X $1) = $240
BA 320
Advanced Lot Sizing Rules: EOQ
2(30)(60
EOQ   60 minimum order quantity
1
Total cost of EOQ = (2 X $60) + [(10 + 50 + 40) X $1)] = $220
BA 320
Advanced Lot Sizing Rules: POQ
POQQ/d60/302 periods worth of requirements
Total cost of POQ = (2 X $60) + (20 X $1) = $180
BA 320
Planned Order Report
Item #2740 Date 9 - 25 - 05
On hand 100 Lead time 2 weeks
On order 200 Lot size 200
Allocated 50 Safety stock 50
SCHEDULED PROJECTED
DATE ORDER NO. GROSS REQS. RECEIPTS ON HAND ACTION
50
9-26 AL 4416 25 25
9-30 AL 4147 25 0
10-01 GR 6470 50 - 50
10-08 SR 7542 200 150 Expedite SR 10-01
10-10 CO 4471 75 75
10-15 GR 6471 50 25
10-23 GR 6471 25 0
10-27 GR 6473 50 - 50 Release PO 10-13
Key: AL = allocated WO = work order
CO = customer order SR = scheduled receipt
PO = purchase order GR = gross requirement
BA 320
MRP Action Report
Current date 9-25-05
ITEM DATE ORDER NO. QTY. ACTION

#2740 10-08 7542 200 Expedite SR 10-01
#3616 10-09 Move forward PO 10-07
#2412 10-10 Move forward PO 10-05
#3427 10-15 Move backward PO 10-25
#2516 10-20 7648 100 De-expedite SR 10-30
#2740 10-27 200 Release PO 10-13
#3666 10-31 50 Release WO 10-24
BA 320
Capacity Requirements
Planning (CRP)
 Creates a load profile
 Identifies under-loads and over-loads
 Inputs
 Planned order releases
 Routing file
 Open orders file
BA 320
CRP
MRP planned
order
releases
Capacity Open
Routing
requirements orders
file
planning file
Load profile for

each machine center
BA 320
Relaxing MRP Assumptions
 Material is not always the most constraining

resource
 Lead times can vary
 Not every transaction needs to be recorded
 Shop floor may require a more sophisticated
scheduling system
 Scheduling in advance may not be appropriate
for on-demand production.
BA 320
Enterprise Resource Planning
(ERP)
 Software that organizes and
manages a company’s business
processes by
 sharing information across functional
areas
 integrating business processes
 facilitating customer interaction
 providing benefit to global companies
BA 320
ERP Modules
BA 320
Organizational Data Flows
Source: Adapted from Joseph Brady, Ellen Monk, and Bret Wagner, Concepts in
Enterprise Resource Planning (Boston: Course Technology, 2001), pp. 7–12
BA 320
Selected Enterprise Software
Vendors
BA 320
ERP Implementation
 Analyze business processes
 Choose modules to implement
 Which processes have the biggest impact on
customer relations?
 Which process would benefit the most from
integration?
 Which processes should be standardized?
 Align level of sophistication
 Finalize delivery and access
 Link with external partners
BA 320
Customer Relationship Management
(CRM)
 Software that
 Plans and executes business processes
 Involves customer interaction
 Changes focus from managing products to
managing customers
 Analyzes point-of-sale data for patterns
used to predict future behavior
BA 320
Supply Chain Management
 Software that plans and executes
business processes related to supply
chains
 Includes
 Supply chain planning
 Supply chain execution
 Supplier relationships
 Distinctions between ERP and SCM are
becoming increasingly blurred
BA 320
Collaborative Product Commerce
(CPC)
 Software that
 Incorporates new product design and
development and product life cycle
management
 Integrates customers and suppliers in the
design process though the entire product life
cycle
BA 320
ERP and Software Systems
Customer Relationship
Management (CRM)
Customers
Time to Customer
Time to Market
Collaborative Collaborative
Design Manufacture
Collaborative Enterprise
Product Manufacture Resource
Product
Commerce
DFMA & Planning
Design
(CPC) Delivery (ERP)
Collaborative Collaborative
Design Manufacture
Suppliers
Supply Chain
Management (SCM)
Source: Adapted from George Shaw, “Building the Lean Enterprise: Reducing Time to Market.” Industry Week
(Webcast, June 14, 2001), http://www.industryweek.com/Events/TimeToMarket/ pent0614.html
BA 320
Connectivity
 Application programming interfaces
(APIs)
 give other programs well-defined ways of
speaking to them
 Enterprise Application Integration (EAI)
solutions
 EDI is being replaced by XML
BA 320
JUST-IN-TIME (JIT)
 Inventory strategy implemented
to improve the return on
investment of a business by
reducing in-process inventory and
its associated carrying costs
 Uses signals called KANBAN
 Inventory is WASTE (MUDA)
BA 320

7 MRP

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7 MRP

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Beni Asllani

Copyright 2006 John Wiley & Sons, University

100 tables 100 x 4 = 400 table legs

Work Purchase Rescheduling

Top clip (1) Bottom clip (1)

Pivot (1) Spring (1)

Pressboard Clip Ass’y Rivets

Top Clip Bottom Clip Pivot Spring

LEVEL ITEM UNIT OF MEASURE QUANTITY

Engines Exterior color Interior Interior color Body

Forward scheduling: start at today‘s date and schedule forward to

Item Pressboard Lead time 1

Clipboard 85 95 120 100 100

Item Master File

Pressboard Clip Ass’y Rivets

Pressboard Trim Beanbag Glue

Gross Requirements 85 95 120 100 100

Gross Requirements 85 95 120 100 100

(25 + 175) = 200 units available

Gross Requirements 85 95 120 100 100

115 units available

Gross Requirements 85 95 120 100 100

Gross Requirements 85 95 120 100 100

Following the same logic Gross Requirements in Periods 4

Following the same logic, the Lapdesk MRP matrix is

Planned Order Report

Total cost of L4L = (4 X $60) + (0 X $1) = $240

Total cost of EOQ = (2 X $60) + [(10 + 50 + 40) X $1)] = $220

POQQ/d60/302 periods worth of requirements

Total cost of POQ = (2 X $60) + (20 X $1) = $180

Current date 9-25-05

ITEM DATE ORDER NO. QTY. ACTION

Load profile for

 Material is not always the most constraining

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